Traditionally, sellers and buyers rely on real estate agents to find your dream home and to help close the deal. However, some for sale by owners (FSBO for short) forego any outside help.
Many FSBO’s like to follow this approach because they enjoy benefits like not paying commission to the real estate agents, making their own decisions, and having more control of the sale process.
Despite these benefits, for FSBO’s has several disadvantages as well. It is important that For Sale By Owner understands the drawbacks and consider them before making such decisions. Below are five disadvantages of for sale by owner and selling investment properties yourself.
Disadvantage #1 For Sale By Owner Have No Professional Help
FSBO’s are not as well informed as real estate agents. If you are a first-time seller, you’ll make a number of mistakes when doing for sale by owner,which could be avoided with the help of a real estate agent.
Real Estate Agent must undergo numerous hours of training, understand state law, and become certified and license by the state. FSBO’s lack the knowledge of a true real estate agent.
FSBO’s pretty much do all the paperwork regarding a real estate transaction from start to finish. A real estate agent helps you review sales offers, write counter-offers, etc, which otherwise you would have to do on your own or hire a real estate attorney which are not free. In addition, some FSBO’s make the mistake of overpricing the investment property. Meanwhile, the real estate agent has experience in how to correctly price properties.
Not only that, but a real estate agent will also help FSBO’s in preparing and showing the investment properties to potential buyers. For FSBO’s may not be available for a showing when a buyer is, which limits the property’s exposure and hinders the sale process. Therefore, the best thing to do is to work with a real estate agent who will take care of coordinating open houses, schedule appointments with other agents, meet with potential buyers, and conduct showings of the property.
Moreover, according to the National Association of Realtors, for sale by owner sellers lose 28% of the price they could have gotten if the property owner worked with a real estate agent (taking commission into account).
Disadvantage #2 For Sale By Owner Are Less Knowledgeable of The Market
Most FSBO’s (especially first timers) don’t have the sufficient knowledge and experience in the real estate business that ensures a successful sale. Moreover, some are not good at negotiations or don’t possess the knowledge and skills to smoothly and successfully close the transaction, which means they could be taken advantage of.
Some real estate agents don’t even deal with for FSBO’s as they prefer working with another professional agent. In addition, most real estate agents would encourage home buyers in several ways to work with homes that are listed by other agents. Why? Simply put, FSBO’s aren’t the easiest people to work with. Agent do not work for free and if and when there is no money involved in the FSBO’s property the agent would rather spend more time on other properties.
In addition, first-time FSBO’s don’t know how to correctly conduct a real estate market analysis that helps in pricing the investment property. Most will take a wild guess at the market on homes that sell that look like their property and go from there. Some just assume that because an investment property was recently sold for $200,000, then this is also their home’s worth. This is not necessarily accurate. When selling an investment property as FSBO’s, conducting a real estate market analysis is a must. However, conducting a real estate market analysis is not an easy process for those with insufficient knowledge or experience in the real estate business. You don’t want to overprice the property (which leads to getting fewer offers), and it’s obviously not to your advantage to under price it.
Disadvantage #3 For Sale By Owner Have Limited Marketing
Most FSBO’s have limited contacts and resources to get marketing slips. As a result, marketing can be very challenging especially for those FSBO’s that have full-time jobs and other responsibilities. Having limited contacts means you won’t be able to expose the investment property to a large number of people regardless of obtaining an Multiple Listing Service (MLS) and posting your own pictures. In addition, marketing and advertising can be very expensive. Listing your property on FSBO.com or Zillow.com to name a few and providing some pictures doesn’t necessarily result in getting good offers.
Only licensed real estate agents have access to and can list investment properties for sale on MLS. Buyers’ agents search the MLS for potential investment properties to show their clients. FSBO’s only have a few options to attract potential buyers, and, as a result, will miss out on showings. This single real estate tool can foster interest in the investment property, result in more showings, and lead to a faster sale. Unfortunately, it’s not available to FSBO’s.
Disadvantage #4 For Sale By Owner Requires Time
Based on all the responsibilities of real estate agents which we’re previously mentioned, you can clearly tell that the traditional process of selling investment properties is time-consuming. FSBO’s takes much more time and effort and guess work of their neighborhood market! Simply putting up a for sale by owner sign is not nearly enough to get the property sold.
FSBO’s need to check and inspect the investment property for anything that might need repair, prepare and stage the property, market and advertise it, handle all the paperwork and showings, and not to mention spend the time to learn how to conduct a market analysis and familiarize themselves with all legal and financial issues. For sale by owner sellers must be prepared from start to finish!
Disadvantage #5 For Sale By Owner Mishandle Their Property
Finally, the FSBO’s process can be emotionally difficult for real estate investors who are attached to their homes and could have a hard time letting them go. This alone is why most do not like home inspectors because their home from their point-of-view is in perfect condition. This is, in fact, a reason why FSBO’s overprice their investment properties when selling them, as for them their homes are obviously very valuable.
Moreover, it might be awkward for you to show your home to a potential buyer (who essentially is a stranger) and get rejected or never hear of them again. Some FSBO’s even change their minds at the sudden realization that they’re going to lose their home with all the memories it holds! For this reason, working with a real estate agent guarantees a successful real estate transaction.
Thus, before you sell your investment property as for sale by owner, consider the following questions: for sale by owner
- Can you handle all required documents and paperwork?
- Will you be available for showings whenever a potential buyer is available?
- Can you negotiate with potential buyers and smoothly close the transaction to where your not losing?
- Do you have enough knowledge and skill to conduct a real estate market analysis?
- Do you have contacts or marketing strategies that will attract potential buyers?
- Are you prepared to spend the time and effort needed for the success of this process?
- Are you able to make reasonable investment decisions regarding your home?
- Are you willing to spend thousands on marketing on-top of what you spent to get an MLS?
- Are you willing to get a Home Inspection and perhaps fix the unknown issues before you list?